UPDATE: Sendhil Mullainathan Thinks Messing Around Is the Best Use of Your Time

Whenever we replay an old episode like we’re doing today with one of my all time favorite conversations with Sendhil Mullainathan, I always add a few words of context at the beginning to give listeners an idea of why we chose this particular episode. And with Sendhil I thought, I’ll just say he’s one of my absolute favorite people in the world. But then I had the good sense to relisten to our original conversation, only to realize that is the exact phrase I used to introduce Sendhil in the original episode a few years ago. For me, there is no one more fun to talk to than Sendhil.

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I am especially excited about today’s episode because my guest is Sendhil Mullainathan, one of my absolute favorite people in the world. Sendhil is a world-class economist, a MacArthur “Genius” recipient, and holds a university professorship at the University of Chicago. That’s a special position reserved for only the most highly esteemed faculty. Only 10 of the university’s 3,000 faculty members have that title. What makes Sendhil so special? His mix of brilliance and childlike curiosity make him unlike anyone I’ve ever known. His research reflects his curiosity. He’s written about everything from racial bias and artificial-intelligence algorithms to the psychological effects of poverty, from the determinants of C.E.O. pay to corruption, and who gets a driver’s license in India.

Welcome to People I (Mostly) Admire, with Steve Levitt.

I’ve known Sendhil for 25 years, but it wasn’t until he left Harvard to come to the University of Chicago a few years back that I came to fully appreciate him. Lots of people are interesting if you only talk to them once a year. But not many people can make everyday conversation fascinating. He just never fails to amaze me with his creativity and breadth of knowledge. And I’m quite confident that once you hear him talk, you’ll agree.

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LEVITT: Sendhil, I always eagerly look forward to our conversations and two reasons I love talking to you are, first, there’s always something that has you so excited you can barely contain yourself. And second, what that something will be is completely unpredictable. So the last time we talked, it was an Oculus virtual reality headset that had transformed your life. So is your love for the Oculus still going strong? 

MULLAINATHAN: Absolutely. I have to say it is one of the more amazing inventions. I’m sure that lots of people out there who’ve been using it for years are like, “How is this an insight?” But these media for communication, by which we can translate ideas to each other, they may start off as novelties but they have profound consequences on how we live our lives. 

LEVITT: So I was convinced when we talked and you were so excited. I went right home and I immediately bought an Oculus for my research center because one of our goals is to transform the educational system. And the way you described your experiences, all I could think about is that the possibilities, if we got this technology into classrooms, must be infinite. And I must say the workers in my center, I’ve never seen them tackle a project with such gusto. Our Oculus has been in use, I’d say 10 to 12 hours per day, every day. And all of that time, I’m sure, is devoted to exploring the educational potential of the device. One thing I know about you is you don’t think small, you always think big. What’s your big vision for what happens with V.R.? 

MULLAINATHAN: Let me throw out an idea for you and see what you think. Why do we go into offices at all? I mean, at all. Why do we fly across the country? Why do we do any of it? And it’s because there is still a reality that somehow when you and I talk on the phone or when you and I even talk on Zoom, it’s not quite the same as being in person. Now, it’s entirely possible that we can recreate that experience 100 percent with virtual reality, which if you think of the knock-on consequences — let me give you an example. One of the things that people say is that the cell phone decoupled a phone number from a location. Suddenly the cell phone made it so that a phone number referred to you, not the address at which you were sitting. If similarly your office location was not a physical place, but was you — you can work from anywhere. You can do anything. It totally transforms our capacity to interact with each other and how we interact. So I’m curious what you think of that one.

LEVITT: I actually thought you were going to say something different. I thought you were going to emphasize the fact that with virtual reality, you can bring any place to you. As well as you bring you to any other place. So you can be in the Grand Canyon or under the water or inside a molecule — you can be miniature, now, moving around, NaCl — sodium and chlorine atoms. 

MULLAINATHAN: Yeah. That’s a great idea. Including places that aren’t really places, per se. You could be inside of the brain watching neurons fire You’ve seen this, right? Like a good figure, a good drawing of some effect suddenly changes your understanding of it. So people say Maxwell, for example, came up with his equations for electricity in large part because he came up with these good diagrams, and the same is true of Feynman diagrams, et cetera. Imagine what it’s going to do for science. If you can put yourself in a high-fidelity simulation of the thing that you’re studying. Bring the place to you is a terrific way of putting it. 

LEVITT: What’s the path? The one problem is you’ve got this two-sided market issue, which is that let’s just say, schools are the target — if schools don’t have the technology and adopt it, then it doesn’t make sense to develop the programs for it. But the schools won’t adopt until you have the programs.

MULLAINATHAN: If you look at a lot of the early-day uses of computing, they weren’t blow-you-away. They’re just things that really got some people excited. Like I remember calling up Bulletin Boards to do virtual Dungeons and Dragons with — like there was a modem. I still remember it going “Churchurchur.” Now you would have said, “We built all this technology so you can play a role-playing game?” Well — whatever. But it’s related to your research assistants who work at your center. They’re playing and play is so underrated because it just fuels this first phase of all sorts of infrastructure building. And so, I think even if 10 years out, we imagine all these grand changes. It heartens me that right now people who start playing with it, enjoy playing, and then start tinkering, and make stuff they enjoy. Because that gives you that kind of base-layer of stuff and just creates demand. And from it, you get all this other cool stuff.

LEVITT: And never having done it myself. What makes it so special?

MULLAINATHAN: Here’s a psychological fact that I think many people may not have realized. It’s like when someone says to you optical illusion, you think, oh, I know that it’s like this image where it’s an old lady or a young woman — you can look at it both ways. But they forget that like every photograph, every T.V. screen is an optical illusion because it is truly two-dimensional, but your mind creates three dimensions. There’s no three dimensions. It’s just two. But that optical illusion is actually relatively low fidelity. You put on the V.R. set and it feels 100 percent like 3-D. So for example, there’s this little thing with Jurassic Park and a dinosaur. And I was like, “Oh, let me play this video.” Your heart is beating. And when the thing’s tail comes at you, you say to yourself, “It’s not a real tail. Do not duck.” And then you’re like, s**t, I’m ducking before I know it. It taps into this very basic sensory system and that’s just amazing.

We’ll be right back with more of my conversation with economist Sendhil Mullainathan after this short break.

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LEVITT: This is going to seem off point, but about 20 years ago in a seminar, you said something, Sendhil — and I remember virtually nothing from 20 years ago. It’s incredible that I remember this. You were giving a seminar. We were both just young professors getting started. And you said something like, “A stranger tells you some random fact, you’re far more likely to remember that fact if the stranger is wearing a bright orange clown wig then if she’s average looking, even though it’s the same fact,” and your point was about salience and how things that are unrelated to the actual content have a huge impact on how people perceive it. Now, I find it so ironic that I can remember this point you made about salience — somehow you turned into the clown. Do you remember saying that? 

MULLAINATHAN: I don’t remember the clown specifically, but it is something that’s stuck with me. The mind doesn’t code information because it’s important or you really want to remember it, it codes information because of these kinds of salient things. And it reminds me of — I’m not going to ask if you read it, but have you at least pretended to read Marcel Proust’s Remembrance of Things Past? 

LEVITT: No, I’ve never even pretended to read it. 

MULLAINATHAN: Some of us have pretended to read it. It’s six volumes or something so at a minimum you can say things like, “I read volume one,” even though you basically bought it. So the opening scene in there is exactly this. He’s in bed and he bites into this Madeleine, this pastry, and suddenly he’s flooded with this memory of being at his aunt’s house. And he realizes it’s because the flavor of this pastry, is strongly associated with that time at his aunt’s house. And something as simple as the smell and flavor brings with it these evocative beautiful memories. And you’ll notice this in yourself, like smell — so salient — brings with it so many things. The memory system doesn’t work the way you want it to work. 

LEVITT: And so is it your hypothesis that lessons taught through virtual reality might be much stickier than other means of learning?

MULLAINATHAN: Absolutely. Yeah. I’d say that in general, we learn so much better when we’re doing things than when we’re just listening to things. I’ll give you an example. If I say to you, “Think of one of your favorite meals from a past vacation five years ago.” You can probably remember — like you had it exactly once, but you can probably remember the dish and you can probably remember what was in it. And you remember the feeling you had. That’s astonishing. If I said to you, “Remember a good conversation,” I’d be like, “I don’t know. We talked, it was nice. It was fun.” But taste, smell — these things, they’re just hard wired back in. 

LEVITT: So along those lines, I told you something I remembered from 20 years ago, but I also want to make a confession to you. You wrote a book and I don’t know, it must’ve been almost a decade ago and the book was called Scarcity and I love the book. I read it in two or three sittings. My blurb is on the cover of the book and I’ve raved about it to anyone who would listen. So as preparation for this conversation today, I went back and I looked at the book for the first time in ages. Obviously, I remember the key thesis of the book. Like you have a really simple point that has stuck with me, but I would have sworn I have never read the book before. It’s loaded with these stunning experimental results and these interesting stories. And as I read them, I felt like I had literally never read about this experiment before, when obviously I had — I would have thought that oh yeah, of course this is the study when the people weren’t allowed to have lunch and then they had to do the word search. Oh yeah. I can’t believe — nothing. I wonder if my chronic lack of sleep from having too many kids really left me somehow deeply, mentally impaired. What do you think?

MULLAINATHAN: So that’s at the heart of this app that we’re releasing that I want to tell you about in a second, but I also want to tell you that your experience is the experience everybody has. Lately, I’ve asked people the following question: “Hey, what’s a novel that you really like?” And they’ll tell me the novel. And I’m like, “Great, can you tell me how it ends?” And they’re like, “Oh…” I say, “Okay, fine, you can’t do that. Can you tell me two of the main characters’ names?” They’re like, “I remember one kind of…” and it’s amazing how quickly things that you’ve read — they come in and they go out the other ear. It’s just astonishing.

LEVITT: Do you think that’s particular to reading? Is reading an especially bad way to gather information or do you think it’s more generic?

MULLAINATHAN: I think it’s two things. We imagine the mind to be this sort of warehouse of information, but don’t appreciate how much is just open doors. It’s like a train station that people walk through. Like ideas are just going through the train station of our mind — not many things stay behind. But you’re onto something. I think reading is just such a bad way to learn because in many ways, it’s passive. It’s not experiential. Like you remember your experiences, you remember the feeling of being on a rollercoaster, those physical highs, those ahas that you yourself have experienced, but not the things that you’ve read about. One of the things therefore I try to do in class is rather than teach people things, I try to create little experiences for them. You’ll like this one, Steve. So do you know this $20 auction? You basically say, “I’m going to auction off this $20 bill.” 

LEVITT: Where both people have to pay?

MULLAINATHAN: Both people have to pay.

LEVITT: I love that. Yeah. Tell people about it. It’s incredible. 

MULLAINATHAN: Yeah. In class, I hold it up. I say, “Here’s a $20 bill, I’m going to auction it off, and so I’m going to give it to the winner just to make things interesting, the highest bidder wins the bill and pays. The second highest bidder doesn’t get anything, but they also pay.” So at first everyone’s a little hesitant and you’re like, OK, $20 — and minimum increments of bids of a dollar. So of course somebody says a dollar and you say, “OK, a dollar going once, going twice…” — I’m not going let this guy get $20 for a dollar. So someone else bids two. And that’s all you need.

LEVITT: So the key is that unlike every other auction in the world, both the high bidder and the second-place bidder, both have to pay, they pay whatever their bid was. 

MULLAINATHAN: Exactly. And the highest bidder wins the bill. 

LEVITT: Yup.

MULLAINATHAN: Okay. So once you have one person bid a dollar and somebody else has bid $2, think of what is about to happen. I say, “OK, going once, going twice …” the dollar bidders like, well I’m not going to let this guy get it for two — to get to three. And they just keep leapfrogging each other. A crucial thing happens when someone has bid 10 and nine, the $9 bidder says, “I’ll bet 11.” At that point, I’m making a profit. I’ve now just auctioned off a $20 bill, at a minimum, I make a dollar profit because someone’s bid 11, someone’s bid 10, I’m getting 21, I’m giving up $20. Cause it seems absurd that I’m making a profit off of this. And the second crucial thing that happens when the highest bid is at 19, because at that point, both players know this is not going to end well, but they don’t want to be the one for whom it ends badly. So the $18 bidders — “Wow, I’m going to lose 18 anyway, let me bid 20.” 

LEVITT: I’ve seen this happen, it’s always the same. Until that point, they don’t feel that bad because they feel like this is going to end at 20. So they think OK, fine. I’ll bid 20. I’ll break even, the other guy will bid 19. He’ll lose 19. We’ll be done. But then when you get to that point, something awful sets in. Cause what happens then?

MULLAINATHAN: The $19 bidder’s like, “I’m losing 19 and I’m not getting anything. If I just bid $21 for this $20 bill, I can at least recoup some of my losses.” Once you cross that boundary, there is no stopping this freight train. It’s especially awesome during classes when you have these sort of more bro-ish — because they just won’t let it go. You have to just pull the plug. You have to say, “I am calling it here at $42, highest bid.” It’s absurd. Obviously the two people involved feel the lesson, but so does everybody else having been part of it. And I’d say, “Now let’s talk about the sunk-cost fallacy. The idea of throwing good money after bad.” Now, when you talk about the sunk-cost fallacy, it has real personal resonance. Like people will remember this experience and that lets them understand sunk-cost fallacy more than if I just talked it through — don’t throw good money after bad, etc.

LEVITT: I never thought about that in terms of sunk costs. What’s always been to me so interesting is it’s a game that once you start it, doesn’t have an obvious equilibrium because if I’ve bid 40 and you’ve bid 41, each time I’m faced with roughly the same problem, which is for $2 more, I get a chance at winning 20. And so if the other guy will quit with a 10-percent probability, it makes sense to do it.

MULLAINATHAN: Yeah, exactly. I should walk through how I do it. I say here’s a sunk-cost fallacy throwing good money after bad. Here’s something called “escalation of commitment” where you consistently keep ignoring — you’re like we’ve already done it. It’s only a little bit more. And I think a lot of sunk-cost fallacies play out like this $20 bill auction. They’re like these little escalation of commitments. If that makes sense. It’s like you’re in a bad relationship. Let’s give it another week. OK. But a week from now, where are you going to be that’s that different than today? This project doesn’t look that good. Let’s give it another $10,000 investment and let’s see how much — so there’s this element of the thing where you’ve spent some resources, put yourself, actually, ironically, not that differently from where you started and you don’t step back and say, “Where does this whole thing end?” Locally, every single extra dollar seems to make sense. But if you step back you’re like, “Where does this thing end up?” 

LEVITT: Yeah. The fact that every time you’ve spent the extra $2, the other guy’s topped you, over time, that should change your probability about what’s going to happen next. Related to that decision-making, I woke up in the morning for maybe five straight years. And the first thing I thought about every morning is should I quit my job as a professor? And every morning I thought, ‘God, I would so like to quit, but I can always quit tomorrow. And maybe something will happen today that will make me change my mind.’ And so I literally delayed my decision because I had this third option, which is well, as long as I can wait till tomorrow, the cost of waiting is really small. Like a good example in this game is if you weren’t given the chance to go up by $2, which is essentially like pushing the decision until tomorrow, if you just had to make a decision, look, I’m either going to play this game until I’m dead or I’m going to stop now, everybody would stop now. It’s the fact that you introduced this third option, which is like a wasting-away option that completely defines my life. I would say my entire life, that has been my rule of decision-making.

MULLAINATHAN: Your point about deferring to tomorrow is so profound because I think there’s a deep, psychological bias that you tend to think tomorrow will somehow be different. It shows up in so many aspects of life where if you just say to yourself, “If tomorrow is a repeat of yesterday, how would I behave differently?” And so many things change. There’s an employee. They’re not that good. They haven’t done very well. And you’re like, well, let’s give them a chance. The first time giving them a chance may make sense. But after four times you’re like, if tomorrow is going to be a repeat of yesterday, what am I doing? And that simple heuristic, tomorrow is a repeat of yesterday, really cuts through a lot of clutter, like so much decision clutter.

LEVITT: Do you use that in your own life?

MULLAINATHAN: I try to use that in my own life. The place where I’ve gotten better and better at it is in trying to decide what I should do — what should I work on? And it’s tempting to work on things that give you some pleasure in the future, but they’re painful right now. And you end up with so many of those things you say, “Wait a minute, will tomorrow be like today and yesterday, which is just a lot of grinding out in the hope of some big payoff in the future? That doesn’t make any sense.” It’s like, I’m lifting weights for some weightlifting competition that doesn’t seem to ever appear. I loved your coin experiment.

The coin experiment that Sendhil refers to is a research project I did to learn about whether or not people make good choices. I built a web page for people who were struggling with the hard decisions. So, should they quit their job or not? Maybe should they end a relationship or stick with it? And I invited those people to be part of an experiment and if they agreed, I did something really simple — I flipped a coin. And if the coin toss came up heads, I encouraged them to make a change, to end that relationship, to quit the job. And if it came up tails, I encouraged them to stay the course. And the amazing thing is almost 20,000 people flipped coins and the outcome of the coin toss actually affected the way people behaved. And six months later, I surveyed those people to figure out how happy they were with their choices.

MULLAINATHAN: I’ve taken away the fact that when you’re near indifference, which is a lot of the people in your coin experiment, they’re like, “Hey, I’m indifferent. I’ll let you decide.” And when you’re near indifferent, you’re not actually near indifferent, so — right? You should be able to figure out which way the bias goes. You’re like I’m indifferent. Guess what? You have status quo bias. So if you’re near indifferent, it’s easy. Change. And there’s so many things like that. You’re like if you’re near indifferent, what’s your bias? You tend to pick the better known option. Great. You’re near indifferent, pick the less known option. I found that just a very powerful situation, a powerful tool. 

LEVITT: Yeah, for me, it’s just a great heuristic because every problem ends up turning into the same problem. As long as I have strong preferences, I follow my preferences when I don’t know what to do, I know that I’m just messed up because history tells me that I’m always stuck with the status quo. And so I should always make the change. Now, even knowing that, I don’t make enough changes. It’s interesting that I’m the author of a study that says when you’re indifferent, you should make a change. And my whole body convulses at the thought of change and I don’t do it, it’s like incredible. I completely and utterly know that I’m doing something crazy and I do it anyway. That’s how powerful my status quo bias is.

MULLAINATHAN: Oh my God. Status quo bias is so powerful. I don’t know if you’re into food, but one thing I’ve noticed with food is if you say to somebody, “Try this,” and they’re like, “Oh, it has mushrooms. I don’t like mushrooms.” “Go ahead. Just give it a taste.” “No, I couldn’t. I don’t like …” “What are you allergic? Or poisonous to mushrooms?” “No, no, no.” And I am completely like this, so much so that my ex-wife — I didn’t like soy sauce. I was like, “I don’t like soy sauce. I don’t like that at all.” So she would secretly cook me things with soy sauce that I actually liked. It’s this thing of like, why am I so wedded to this status quo that I don’t even experiment a tiny bit? What does one mouthful cost me? Nothing. And it has gotta be a given that I don’t dislike everything with mushrooms. That is absurd, right? I’m sure I disliked some mushrooms, but not all. And so in food, I really see it. Because the cost of experimentation is zero. And yet we do so little of it. I often say to people or they’ll say, “Let’s go to this restaurant. I have a favorite dish here.” “Okay. great. Have you tried any of the other dishes?” “No.” “How many times have you been here?” “Like 30 times. Each time though, I have my favorite. I don’t want to give up on my favorite.” It’s like you tried one thing, try a few others. 

LEVITT: I have a rule of thumb at restaurants, which is I try one thing. If I like it, I’ll go back there over and over. And if I don’t like it, I will never go back. I almost never sample two things on a menu.

MULLAINATHAN: Go back a second time — do you try something else or you just…

LEVITT: Oh, never. No, I wouldn’t even think about it. Almost every restaurant I frequent, I hit the jackpot the first time and I can’t imagine how anything could be better than the thing that I got the first time. Ever. But I’m happy about that. Actually, that one doesn’t bother me. I do a lot of things that bother me, but that one seems to me, that’s sensible. Once you hit something good, why would you ever mess with success? 

MULLAINATHAN: Next time you go to your favorite restaurant, order the thing you like, and since I know you have the cash, order something else on top. It’s like costless experimentation. Just see what it tastes like. Who knows if they did one thing — maybe they do a second thing right. 

You’re listening to People I (Mostly) Admire with Steve Levitt, and his conversation with economist Sendhil Mullainathan. After this break, they’ll return to talk about Sendhil’s new app that helps people retain new ideas.

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This has been such a typical Sendhil conversation. In a few minutes he managed to go from Feynman diagrams to Marcel Proust, to the sunk-cost fallacy to not liking soy sauce. Now, I want to hear more about this new app. Since when do econ professors develop apps?

LEVITT: So earlier in our conversation, you referenced an app that you developed, it’s a learning app. What does it do?

MULLAINATHAN: It’s called Pique — P-I-Q-U-E, like “pique your interest,” and at its core it’s trying to say, “Look, we have a fundamental problem in learning new ideas. We read about them, but reading is a bad way of learning.” So what it tries to do is it takes books and the ideas in books and says, “We’re going to turn those into experiences.” So like the dollar auction, you’re actually going to go and experience something in the app and then we’ll say, “Look, you’ve learned about escalation of commitment.”

LEVITT: You say books. What do you mean by books? Like real books?

MULLAINATHAN: Yeah. Like real books. The first set we’re doing right now is behavioral economics, behavioral science books. I’ll give you an example. There’s this great book by Leidy Klotz. It’s called Subtract. It just came out. It’s awesome.

LEVITT: Oh, yeah, yeah. I’ve heard of that. I haven’t read it.

MULLAINATHAN: It’s really nice. And it’s one of the books in our app and what we do is he has an experiment where there’s a grid. Okay. So people come into the app, they see a grid, and the grid has different colors. And so your job is when you click on a tile, it changes the color and flips it. It’s a little game. And what you want to do is you want to try to make the grid symmetric color-wise. OK. And you find that in about 12 flips, you can make it symmetric. And there’s actually a much easier way to do it than 12. I think it’s four or eight steps — much fewer. But when you do the 12 it’s because you’re looking to add colors to create symmetry. The way you do four is you remove colors to create symmetry. And Leidy’s point in the book is that in many situations, we look to create good changes by addition, we rarely look to get to where we want through subtraction. Reading Leidy’s book is a delight, but playing games like this, where you kind of struggled with the game, you’re like I can’t get it. I can’t get to the best — and then you have the aha moment. You’ve learned the subtract lesson by doing it. And you remember that far more. And so the app Pique takes these books and creates these experiences.

LEVITT: Is your thought that people will read the books first and get the lessons reinforced through the app or that the app potentially becomes a very time-efficient way to avoid having to read 300-page books that only make a couple points?

MULLAINATHAN: Yeah. I imagine that for a lot of people they will do the app and then for some it’ll motivate them to read more detail in the book, because it’s also more interesting to read a book when you’ve got a lesson from it motivating you and pushing you through. And I do think there’s a time efficiency gain of doing the experience. It’s like teaching.

LEVITT: So take a book that many people would know…

MULLAINATHAN: We have one that I like, which we can try on your listeners and I can try on you as well, Steve. It’s a memory experiment. Okay? I’m going to list a bunch of words. I don’t want you writing anything down. And then I want you to, after I list the words, write down whatever you remember. I’m going to list about 10 words. So it’s pure memory. I’ll say them out loud. Don’t do anything. And then after I say, “Go,” write down as many as you can remember. Okay, here we go. Bed, rest, awake, nap, dream, wake, doze, snore, slumber, blanket, snooze, tired. Okay. Go ahead. Just write down as many of these words as you can remember. 

LEVITT: Did you write them down? So you know what you actually said?

MULLAINATHAN: I did. Yes. Okay. Do you have it? 

LEVITT: All right. So I got seven written down.

MULLAINATHAN: Okay. So let’s see. Do you have the word “bed”? “Tired”? “Dream”? “Slumber”? “Sleep”? Oh. So for your listeners, let’s just say you did, Steve. Let’s just pretend you had “sleep.” OK. So, this experiment, over 50 percent of people remember the word “dream” and over 50 percent of people remember the word “sleep,” but there’s a big difference between those two words. “Dream” was on my list, “sleep” was never on my list. You can reliably induce a false memory of the word “sleep.” And you can see what’s happening here — sleep is in this sort of network of these words. It’s like that party where your friend says to you, “Hey, you remember that party you were at?” And you’re like, “I wasn’t at that party.” They’re like, “No, you were there.” And it’s because every one of your other friends was there, they’re like, “Well, you were there too.” And “sleep” is like that. And so this is a false memory inducement, and you can give all sorts of lectures about people’s memory is fallible. Don’t trust your memory. But you do an experiment like that and suddenly people are like, “I really remember the word ‘sleep.’” And in fact, you did not remember the word “sleep” and it teaches you a lesson around the fallibility of memory. 

LEVITT: I brought up your Scarcity book before. One of the things I found so unbelievable about that book is that I saw the title and it’s called Scarcity. And I thought to myself, ‘This is so arrogant because economics is the study of scarcity. And for the last 200 years, we’ve all been studying scarcity. So who does Sendhil think he is that he’s going to have something new to say?’ And I read the book and I’m like, “Wow. Sendhil had something new to say.” So first tell us what you had new to say. And then I think bring it home with the experiments.

MULLAINATHAN: So economists study the physical fact of scarcity, you know, everything is scarce. You buy something, you’re not buying something else. There’s no constraint. What we are studying here is the psychology of scarcity, the feeling of having too little. And the hypothesis is that when you have too little of something that tends to capture your attention, your mind automatically goes towards it. When you’re very busy, your mind goes towards the things taking up your time, and the deadlines, the things that are due. For the poor who are scarce in money. Their mind automatically goes towards, “Oh my God, will I be able to make rent?” And, for me, the most satisfying thing about the book, it’s the sheer amount of feedback I’ve gotten from people who have experienced poverty or who are experiencing poverty saying this captures my experience of being poor. And I’ve had periods of poverty and that’s what you feel. Your mind just keeps going to this thing. So I’ll give you the example — this is a study, not from the book. This is with Anuj Shah. And what we did was we reran the same word study that we just did around the word “sleep,” but we ran it with a new set of words. They’re words like “cash, pay, loan, dollar, gas, grocery.” For rich people, if you give them that list, there’s no word that they remember having heard — that wasn’t there. They remember some of these words, but they don’t make up a word. But for poor people, when you give them the same list, a huge fraction of them remember having heard the word “money” because for the poor, you hear “grocery,” they think money, you hear “gas,” they think money. And it’s like many roads lead back to money. The consequence of this is that if your mind was a processor, like a computing processor, a fraction of it beyond your control is constantly churning on these concerns about money, which obviously makes it much harder to think about anything else.

LEVITT: I love these studies. Can you tell the one about when you bring people into the lab and you tell them not to eat beforehand?

MULLAINATHAN: Oh, yeah, yeah. This is great. People were brought into the lab — everyone’s hungry when they show up, but some of them are given some food and now they’re less hungry. And they’re all given the same word search tasks. Imagine a grid of letters and you have to look for a word and we say, “Okay, first word ‘cookie’.” And so you search for “cookie.” Second word “tent.” And what you’re really testing is after you’ve seen the word “cookie,” how long does it take for you to find the word “tent”? If you’re not hungry, whatever, it’s just another word. Just go right along. If you’re hungry, it takes much longer to find the word “tent” because your mind is still on that cookie. Not even that real cookie, but those letters C-O-O-K-I-E. All it takes is a little bit of a prime for the hungry people and suddenly their mind is off thinking about food. And I think that’s an experience I’m sure everybody’s had — that it’s very hard to think about something else when you’ve just been reminded of a cookie. 

LEVITT: And in these studies, the effects are huge. I mean, you talk about effects that when you prime people to think about what their problem is, we’re talking about like a difference of 10 IQ points between otherwise identical people, some of whom are primed to be thinking about the problem that fills their mind?

MULLAINATHAN: Yeah, exactly. The hypothesis is because it’s taking up our bandwidth, as we call it, the effect on your effective IQ can be quite large. There’s a study by Claire Duquennois where there are these sort of math exams that have word questions. And some of the word questions involve monetary things. Bob has $10. Fred has $5. And she basically shows that only for poor students, after you get a monetary-themed question, you do much worse on the question that comes after. So much so that just having one in 10 more monetary questions in an exam reduces the performance gap by 6 percent. 

LEVITT: Wow. That’s crazy.

MULLAINATHAN: I should tell you one other study that we’re just finishing cause what’s been fun for me in the last 10 years is seeing people take these ideas and do new different studies. So this is a study by Suanna Oh, and Supreet Kaur, and Frank Schilbach. So what they do is these are workers in India — they get paid every two weeks. Now this is lean times. So you know what it’s like, you haven’t gotten paid yet, so you’re pretty far away from your pay day. So you’re like, sh*t, you’re pretty tight on money. And what you find is if you just give them some of their paycheck, like four days early, their actual productivity goes up. They’re actually just more productive because they can focus more at work. And the way that they’re focusing more at work is pretty cool because what these people are doing is they’re making leaf plates, they’re taking lots of little leaves and stitching them together to make a plate. And when you look at the workers who have just gotten a little cash infusion and don’t feel as strained, you can look at the plates they make and they just have far fewer errors. Whereas the ones who did not get the financial infusion, you can see places where they made a mistake, had to take the stitches out and do it again and again. It’s striking you can see it in the way people work. And I started to notice how much of my own work comes from — is my mind fully there? That’s just a big part. If I have anxiety or something that my mind keeps going to, that’s the biggest detriment to all my work. 

LEVITT: This makes total sense, but it doesn’t really give a lot of clues of getting out of poverty other than giving people a bunch of money. Are there other implications?

MULLAINATHAN: I think there’s definitely other implications. Economists are very sensitive to taxes. Like we try not to tax when we can avoid it, but we’re very insensitive to cognitive taxes. If I said to you, “Okay, you want to get financial aid? Go ahead, fill out this 50-page form.” Yeah, that’s a time tax, it’s whatever, it’s two hours. In fact, our theories say, that’s a good thing because hey, if you really need it, you can fill it out. But you forget, just like those kids in the math exam, asking a poor person to fill out a 50-page form all about their finances is incredibly cognitively taxing. It’s like asking you to think about the thing that’s stressing you out the most. And so we impose these cognitive burdens on the poor without really realizing that we’re imposing these cognitive burdens. And when you start looking at that, you realize how many of our programs are cognitively silly. So like TANF, this is welfare, this is a welfare program. The way you find out that you’re about to hit your five-year max is you get a letter in the mail with two, three months left. How does this make any sense that we’re asking you to keep track? It’s absurd, especially once you realize these types of results that it’s cognitively very challenging to think about these things. So I think that angle of rethinking how we design all the programs that poor people encounter through this lens, I think of as a promising angle.

LEVITT: So you were in Cambridge, back and forth between Harvard and M.I.T. for over two decades. Why did you decide to move to the University of Chicago after all these years?

MULLAINATHAN: The honest answer is actually very related to your flipping a coin study, actually. One of the things that was most influential was when I was trying to decide what to do, somebody said to me, “Sometimes change is good just for change’s sake.” That really stuck with me because on my pro-con list, nowhere was there written “change.” It’s like, they’re material aspects, but when you reflect on it, what’s the biggest aspect of this decision? Change. I’m going to be in a whole new city, whole new environment. And so once someone gave me that advice, I was like, oh, this seems like a relatively straightforward thing. Change by itself is just good. It’s related to where we started, we ridiculously underweight the value of change. You know what I mean? Like you think you’re the same person wherever you go. That is absolutely not true. You’re exposed to new things. Your mind changes. In many ways. I think people become stagnant as they get older because they’re not doing enough to expose themselves to truly new situations.

LEVITT: Do you have advice for young people who are trying to figure out their place in the world?

MULLAINATHAN: The one piece of advice I would give comes from this awesome paper. I think it’s Dan Gilbert. It’s called the end of history illusion. If you ask people, how much have they changed in the last five years? Most people say, “A lot.” Especially young people, like, take a 22-year-old. “Oh my God. Who was I when I was 17? My God, 17 to 22 — I changed so much.” Then you ask people, “How much will you change in the next five years?” They’re like, “A little bit.” Pick any age, you always act as if history has ended. All the change you’re going to do is done, which is absurd because from 17 to 22, you changed a lot, 22 to 27 you changed a lot. So I think the biggest error people make is they think they are choosing for who they are right now. What they’re actually choosing is for this person five years from now, who’s going to be very different from them. So if you say I’m deciding whether to go work at company A or company B, if you think you’re set, what you’re choosing is between two companies. If you think that you’re changing, what do you change towards? You change towards the people around you. So what you should ask yourself is, “I am going to become like the people at company A or like the people at company B. That’s who I’m actually going to become. Which of these kinds of people do I want to be as a person?” That puts a whole different perspective on it because now you no longer think of yourself, you’re actually choosing versions of you and you really have to accept that. Whenever I try to tell students this, it’s amazing how much they resist it. People say this to me, “I’m going into consulting, but I’m not going to be the stereotypical consultant.” I’m like, “My best guess is you are going to be the stereotypical — what do you want me to tell you?” 

LEVITT: I’ve never heard anyone say what you just said, it’s so interesting to hear it. 

MULLAINATHAN: I want to hear your advice.

LEVITT: And it’s actually evolved a lot. It’s been affected by this podcast and hearing what other people say, but I have come to believe that the single most important thing to recognize when you’re young is that life is long and it’s not a race and there’s this sense of urgency of not getting off the track of having to do something tomorrow. So before I went back to get a Ph.D., I spent two years doing consulting. And I was panicked that I was behind the other people. Look, it made no sense to be panicked about it. So that’s really, to me, not being in a hurry and the luxury of knowing that you can make mistakes, you can experiment, you can dabble and still have all the time in the world to be what you want to be.

MULLAINATHAN: The most interesting people we know didn’t know at 22 what they wanted to do. And some of the most interesting people don’t know at 40 what they want to do. And that’s good. If you’re embracing life, that’s what’s going to happen. Yet, somehow you feel like you ought to know, there’s this fixation on it. It’s okay. There’s a lot of other stuff coming down the road. 

LEVITT: And I think society’s gotten much worse on that. As I look at my teenage kids, the amount of focus they have about what college will they go to, what activities am I doing when I’m 13 that will positively influence my chances of getting into college. And that is a kind of rat race that I think we’ve done such a disservice to our kids. 

MULLAINATHAN: I feel like kids get less and less play. I mean, I went to Cornell — very good school. And I remember being stressed about it, but I also didn’t think to myself, I needed to check off a bunch of boxes to try and get into the best school. I just felt like I just had to be myself. Like a ton of time to just explore and just play and acquire interesting ideas and things. It made you able to enjoy and really become intellectual in a way that I couldn’t imagine doing if my only goal were to get good grades and check the right boxes. It goes back to your Oculus point. I really liked it when you said these guys were playing with it. Like play is ridiculously underrated. Every time I’ve licensed myself to mess around, great things have come because that’s how you get into really good ideas, is you mess around. 

What a great place to stop, talking about play. Because I really do believe that Senhil’s willingness to play is a huge part of what makes him special. And I have to admit, I used to love play. But wow, do I find it hard to play these days with all my other obligations. But I’m making a promise to myself — at least for one week, inspired by Sendhil, I’m going to make play a priority.

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A few years have passed since we recorded this conversation, but I did have the chance to catch up with Sendhil recently, and I asked him: what new project are you most excited about? Here’s what he had to say.

MULLAINATHAN: A project I’m working on right now can best be seen by thinking back what it’s like to learn anything. It feels like you’re stuck in a maze and somebody is telling you what the exit looks like. Oh yeah, you’ll see a red door. That’s what it looks like to understand this thing. But you’re just in this maze. You try going this way, try going that way. And all the teacher can say to you is, look for the red door. And you’re like, I don’t see a red door. Then keep going. It happens because there’s a fundamental problem between the teacher and the learner. The learner doesn’t know what they’re trying to learn. The teacher knows what they’re trying to teach, but they don’t know where in the maze the student is stuck. They don’t know what the misunderstanding is. It’s very hard for someone who doesn’t understand something to articulate why they don’t understand it and how they don’t understand it. The project we’re working on tries to get past this mind reading gap by actually using a huge amount of data on how students solve math problems. We’re focused on math right now — ninth grade, eighth grade, seventh grade math — and saying, if we can just use this trove of data on students describing the steps they take in solving these problems, maybe algorithms applied to this data can actually learn: what are the ways that the student misunderstands? Once we have that, we have a map of the maze. If we had a map of the maze, we’ll be able to look and for each student be able to say, oh, now that you’ve told me this, I know where in the maze you are and this is the way out of the maze. This is the way to get to that red door. The end result that we have in mind here is an algorithm that can take in what students are doing and help us understand what they’re thinking and what they’re misunderstanding. And we think that could be revolutionary. 

Next week we’re back with a brand new episode featuring Ingrid Newkirk. She’s the founder and leader of the animal rights group PETA, People for the Ethical Treatment of Animals. I have no idea how this conversation is going to go.

NEWKIRK: While that was happening, I was thinking, ‘Oh God, I’m going to die and that’s the end of my activism.’ And I was really furious. And so I thought, ‘Is there anything I could do to carry on when I was dead?’ And I thought, ‘Yes, you can. You could give a part of your liver to whoever is the president of France at the time to protest foie gras.’

As always, thanks for listening and we’ll see you back soon.

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People I (Mostly) Admire is part of the Freakonomics Radio Network, which also includes Freakonomics Radio, No Stupid Questions, and The Economics of Everyday Things. All our shows are produced by Stitcher and Renbud Radio. This episode was produced by Morgan Levey and mixed by Jasmin Klinger. Our theme music was composed by Luis Guerra. We can be reached at pima@freakonomics.com. That’s P-I-M-A at Freakonomics-dot-com. Thanks for listening.

LEVITT: If somebody provides me detail about anything, and I have no recollection. I believe it’s true. 

MULLAINATHAN: Steve, do you remember that $10,000 bet that we had? I was trying to figure out when you were going to pay me. Because I think I won that bet.

LEVITT: Nah, it’s not good, ’cause there’s not enough detail.